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This paper uses a large household data set from Guatemala to analyze how the receipt of internal remittances (from Guatemala) and international remittances (from the United States) affects the marginal spending behavior of households on various consumption and investment goods. Contrary to other studies, this study finds that households receiving remittances actually spend less at the margin on consumptionfood and consumer goods and durables -than do households receiving no remittances.Instead of spending on consumption, households receiving remittances tend to spend more on investment goods, like education, health and housing. The analysis shows that a large amount of remittance money goes into education. At the margin, households receiving internal and international remittances spend 45 and 58 percent more, respectively, on education than do households with no remittances. These increased expenditures on education represent investment in human capital. Like other studies, this paper finds that remittance-receiving households spend more at the margin on housing.These increased expenditures on housing represent a type of investment for the migrant as well as a means for boosting local economic development by creating new income and employment opportunities for skilled and unskilled workers.

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This literature review covers 50 recent empirical studies of the economic impact of international remittances on the developing world that are based on household survey data. It begins by reviewing the considerable methodological problems confronting economic work on international remittances, and then examines the strengths and weaknesses of various economic studies of the impact of remittances in the developing world on such outcomes as: poverty and inequality, health and education, investment and savings, labour supply and participation, and economic growth. It finds that while international remittances generally have a positive impact on poverty and health in the developing world, remittances can have negative effects on labour supply, education and economic growth.